The revenue of Royal FrieslandCampina N.V. increased by 10.7 percent to 6.1 billion euros over the first half-year 2017. Profit increased by 1.3 percent to 162 million euros. Revenue increased due to an increase in sales prices and the acquisition of Engro Foods in Pakistan. The pro forma milk price for member dairy farmers increased by 26.9 percent to 38.37 euros per 100 kilos of milk. The interim pay-out for member dairy farmers amounts to 1.17 euros per 100 kilos of milk.

Roelof Joosten, CEO of Royal FrieslandCampina N.V.: ‘The milk price for member dairy farmers recovered this year after a number of disappointing years. The higher sales prices for primarily butter and cheese lie at the root of this recovery. In West Europe we were successful in passing on the higher guaranteed price in the sales prices. This is reflected in the increased revenue. The total compensation paid to member dairy farmers increased by 24 percent in comparison to the first half year of 2016. High growth levels were realised in Indonesia and Vietnam, and with cheese and butter. In Germany, the Philippines and Nigeria, result trends are not as positive due to local market conditions and negative currency translation effects, the latter particularly in Nigeria.’

Increased revenue

The increase in revenue to 6.1 billion euros is due to the increase in higher sales prices of 10.3 percent, and the acquisition of Engro Foods in Pakistan at the end of 2016 of 2.4 percent. On balance, currency translation effects had a negative effect of 53 million euros (-1.0 percent) on revenue. The volume of products with higher added value declined by 1.6 percent (exclusive of the acquisition of Engro Foods) and the volume of basic products rose by 1.2 percent. On balance, this had a negative mix effect of -1.0 percent on revenue. Butter products displayed the highest price increases due to the increased global demand for butter and cream products with a declining supply.

Higher operating profit

The operating profit increased by 7.8 percent to 275 million euros over the first half of 2017. Currency translation effects had a negative effect of 13 million euros on the operating profit.

The gross margin increased by 8.2 percent to 1 billion euros due to the fact that the higher sales prices compensated for the increased costs. The cost of goods sold increased by 11.2 percent to 5.1 billion euros. This is mainly due to the higher guaranteed price for raw milk and the increased prices for other raw materials.

The total compensation paid to member dairy farmers for their milk increased by 24.1 percent to 2.1 billion euros (2016: 1.7 billion euros), at a 1-percent-lower milk production level (5,435 million kilos).

The one-off items recognised in operating profit include the 9-million-euro book profit on the sale of the 8.2 percent interest in Synlait Milk Ltd. and the impairment of 20 million euros of the 1.1 percent interest in China Huishan Dairy Holdings Company Ltd.

Stable profit

Profit over the first half-year 2017 increased by 1.3 percent to 162 million euros. The increase in profit is due to the strong recovery of the butter and cheese sales prices. Of this amount, 128 million euros is at the disposal of the shareholder and the provider of the cooperative loan (Zuivelcoöperatie FrieslandCampina U.A.) and the holders of member bonds (first half-year 2016: 117 million euros).

Interim pay-out of 1.17 euros per 100 kilos of milk

On 1 September 2017, an interim pay-out amounting to 1.17 euros per 100 kilos of milk (excluding VAT) will be paid out to the member dairy farmers of Zuivelcoöperatie FrieslandCampina U.A. This is equal to the pay-out for the first half-year 2016. This is 75 percent of the pro forma performance premium over the first half year. The final settlement will be effected in April 2018, based on FrieslandCampina’s results for the financial year and the quantity of milk supplied by the dairy farmers in 2017.

Decrease in operating cash flow

The cash flow from operating activities decreased to 29 million euros (first half-year 2016: 165 million euros). This is mainly due to the higher working capital requirements and the higher guaranteed price. The stock valuation rose as a result and the outstanding receivables increased due to the price increases. Over the first half-year 2017, the outbound cash flow for investment activities amounted to 242 million euros (first half-year 2016: 262 million euros).

Milk supply

The milk supplied by member dairy farmers decreased by 53 million kilos over the first half-year 2017 (1.0 percent) to 5,435 million kilos of milk. During the initial months of 2017, two temporary milk volume control measures were in effect: the so-called 10-cent measure and the temporary FrieslandCampina standstill measure.

Outlook

FrieslandCampina does not make any specific pronouncements concerning the result for the full year 2017.